Perspective: Mid-Day Commentary for December 6

By: Arlan Suderman, Chief Commodities Economist

Fri, 06 Dec 2024, 17:34

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

December 6 - Stocks have struggled to hold this morning's initial gains that emerged out of the monthly jobs report that saw both job growth recovery, but also a rise in the unemployment rate. Rising consumer sentiment provided some support for stocks, although rising inflation expectations somewhat offset that enthusiasm. The VIX slipped below 13 at this hour, with the dollar index trading near 106.0 as Treasury yields have now stabilized. Yields on 10-year Treasuries are trading near 4.16%, firming from their initial break on this morning's jobs data, while yields on 2-year Treasuries continue to trade near their session lows just below 4.10%. Crude oil prices are 1% lower, while the grain and oilseed markets are mixed.

Corn prices remain supported by yesterday's technical reversal on the charts, while rising palm oil prices continue to support soyoil. Yet, soybean gains are capped by weak meal prices and by expectations that Brazil will soon start harvesting a record large crop. Reports within China's cash market indicate that state-backed Sinograin bought roughly 10 cargoes of U.S. soybeans for March and April shipment this week, which is a bit unusual considering how cheap new-crop Brazilian beans are relative to U.S. beans in that window. But Sinograin is also the official buyer of soybeans for China's reserves, and it generally only buys Argentine or U.S. soybeans to go into its reserves, since Brazilian beans tend to not store as well for longer periods of time. As such, it is speculated that Sinograin is purchasing U.S. soybeans to build up reserves ahead of anticipated Trump tariffs and/or trade war, with Argentine soybeans not available until later in the season.

The consumer sentiment index rose to a seven-month high 74.0 for December, in a preliminary reading of the latest survey responses, up from 71.8 the previous month, and above analyst expectations of 73.0. Today's reading compares to a 69.7 one year ago. The current conditions index surged more than 20% this month, reflecting a surge in buying conditions for durable goods, rising to 77.7 for December, up from 63.9 the previous month, and up from 73.3 a year ago. However, the surge in durable goods purchases was driven more by a desire to beat future anticipated inflation, with the survey revealing expectations that year-ahead inflation will average 2.9%, up from last month's expectation of 2.6%. The index of consumer expectations "continued the post-election re-calibration that began last month," rising for Republicans, wile falling for Democrats, with independents close to the average between the two. Democrats most frequently voiced concerns about expectations that policy changes would lead to a resurgence in inflation, while Republicans expressed expectations that policies implemented will result in reduced inflationary pressures. While the year-ahead inflation expectations jumped this month, the long-run inflation expectations inched lower to 3.1%.

Members of the Federal Open Market Committee are out giving speeches today, with their comments indicating a clear lack of consensus on where to go from here on interest rate policy. Fed Chair Jerome Powell prides himself on getting unanimous votes on policy direction, but that may be more of a challenge going forward. The Fed may cut its rate again on the 18th, but support for follow-through cuts is currently eroding among some Fed members, suggesting that a rate cut pause is likely around the corner, if not imminent. That said, Fed Fund futures are trading 89% odds of a rate cut when the Fed meets on the 18th of this month. The potential for a surprise is in play.

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Mike CastleFri, 31 Jul 2026, 16:33

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